27 June 2019

EBA publishes its roadmap for the new market and counterparty credit risk approaches

The EBA published its roadmap on the new market and counterparty credit risk approaches and launched a consultation on eleven draft RTS on the new Internal Model Approach (IMA) under the FRTB (Fundamental Review of the Trading Book) standards along with a data collection exercise on non-modellable risk factors (NMRF).

The roadmap provides a comprehensive overview of EBA deliverables in the area of market and counterparty credit risk and outlines EBA intentions and roadmap with the view of ensuring a smooth implementation of the new approaches in the EU. In particular, the roadmap reflects a prioritisation of the EBA work according to four phases, which is broadly in line with the deadlines included in the CRR2, starting with the implementation of the essential parts of the framework.

The eleven draft technical standards have been included into 3 different Consultation Papers (CP):

• the CP on draft RTS on liquidity horizons,
• the CP on draft RTS on back-testing and profit and loss attribution (PLA) requirements and
• the CP on draft RTS on criteria for assessing the modellability of risk factors under the IMA.

All these draft technical standards specify essential aspects of the IMA under the FRTB and represent an important contribution to a smooth and harmonised implementation of the FRTB in the EU.

The draft standards were developed considering the proposals included in the EBA Discussion Paper (DP) on ‘Implementation in the EU of the revised market risk and counterparty credit risk frameworks' published on 18 December 2017 and the industry feedback received as a result of the subsequent consultation. The entry into force of these technical standards will trigger the three-year-period after which institutions, which have been granted permission to use the new IMA for reporting purposes, will be required to report IMA figures. The consultation on these RTS runs until 4 October 2019.

In parallel with the consultation, the EBA is launching a data collection exercise on NMRF, which is meant to support the EBA in fine-tuning and calibrating the methodology presented in the DP with respect to the computation under the IMA of the capital charge corresponding to risk-factors that have been identified as non-modellable. In order to help banks fill in the template, instructions, specifying also the timeline of the exercise, are available on this webpage. Participating IMA institutions are requested to provide data by 4 September 2019.

Comments to this consultation can be sent to the EBA by 4 October 2019. A public hearing will then take place at the EBA premises in Paris on 5 September 2019 from 11:00 to 13:00 CET time.

Press release

EBA_roadmap for the new market and counterparty credit risk approaches

Consultation Paper on draft RTS on liquidity horizons for the IMA

Consultation Paper on draft RTS on back-testing and PLA attribution requirements

Consultation Paper on draft RTS on criteria for assessing risk factors modellability under the IMA

NMRF data collection template

Instructions on NMRF data collection

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